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HomeWorldCuba’s new parliament will face a familiar economic hangover

Cuba’s new parliament will face a familiar economic hangover


For Jose Guerra Ferrer, an industrial engineer from Havana, “the economic situation in Cuba is bad”. “I hope it can be addressed by the new parliament,” he said, referring to the national assembly elections this weekend.

In recent years, the Cuban parliament has made gradual policy adjustments to try and ease economic restrictions, which is Guerra Ferrer’s hope with the country’s upcoming elections.

The country’s highest political body is composed through committees such as trade unions and student organizations. Once candidates, most of whom are members of the Communist Party of Cuba, or PCC, are nominated, they can confirm their choice for the presidency.

That is certainly the incumbent, Manuel Diaz-Canel, who took over from Raul Castro in 2018. The following year, in 2019, Diaz-Canel, a staunch PCC, passed a new constitution. Amid growing political discontent, it was designed to modernize Cuba’s entrenched state apparatus.

Voter absenteeism has become a hallmark of recent elections in Cuba. For example, turnout in the November 2022 municipal elections fell below 70 percent for the first time, indicating withdrawal from a political system that depends on public support.

Decades of sanctions

Large numbers of Cubans have tried to leave the country (File: Go Nakamura/Reuters)

After US-backed leader Fugencio Batista was ousted in 1959, Cuba became a one-party state led by Fidel Castro and his successors. Since then, the PCC has surpassed all expectations by surviving decades of economic isolation and the disintegration of the Soviet Union, a key ally.

Since the early 1960s, the cornerstone of US foreign policy towards Cuba has been a controversial trade embargo, among other restrictions. Then, in 2015, the Obama administration began normalizing relations with Cuba, including a shift in sanctions.

Donald Trump, on the other hand, reintroduced old measures and also added new ones. He banned U.S. tourism and limited the amount of money Cuban Americans could send to their relatives (some remittance restrictions have been relaxed under President Joe Biden).

“The truth about sanctions is that the repercussions are multi-layered,” said Guillaume Long, Ecuador’s former foreign minister. “Governments are prevented from following standard protocols, which undermines state-building capacity.”

He stressed that “there is no doubt that Cuba’s economy has suffered from US sanctions”. The country also went through a painful adjustment after the collapse of the Soviet Union in 1991. Until then, the USSR supplied 90 percent of Cuba’s oil needs and 70 percent of all other imports, including food and medicine, mostly at subsidized prices. Prices.

Between 1989 and 1994, Cuba’s trade with the former Soviet Union plummeted by 89 percent. While domestic production was under pressure, the government consolidated its control over the economy. Large public companies have survived thanks to privileged access to credit and foreign exchange.

Today, the Cuban economy remains undiversified and dependent on raw materials. Tobacco and sugar account for about 30 percent of foreign exchange earnings. Cuba also exports health services by sending doctors and nurses to Brazil and Venezuela. Tourism is now an important source of income.

Elsewhere, the PCC has succeeded in establishing renowned education and healthcare systems. Not only does Cuba’s life expectancy exceed that of the United States, it is also the smallest country in the world to successfully develop a vaccine against COVID-19.

Recent setbacks

Customers wait in line to enter a supermarket in Havana, Cuba
Tourism, an important source of income, has been hit hard by the pandemic (File: Natalia Favre/Bloomberg)

Due to the excessive role of tourism in Cuba’s economy, COVID-19 has dealt a serious blow to the island. Tourist numbers have dropped dramatically during the pandemic, from four million in 2019 to just 356,000 in 2021, Bloomberg News reported. Foreign currency inflows slowed significantly.

In January 2021, to cope with declining international reserves, the PCC was forced to unify Cuba’s dual exchange rate system. This entailed devaluing the Cuban peso (CUP), which had been set at parity with the US dollar for decades, to its unofficial rate at the time. of 24 pesos per dollar.

However, according to Alberto Gabrielle, a senior researcher at Sbilanciamoci, a Rome-based political think tank, the new rate was “overvalued”. “The devaluation failed to balance Cuba’s import-export mix, creating a shortage of goods and fueling inflation,” he added.

Although difficult to measure, Cuba’s official consumer price index increased by 70 percent in 2021. Unofficial estimates showed that inflation increased by 100 percent to 500 percent during the same period. “The queues at supermarkets and pharmacies got longer and longer,” says Gabrielle.

Together with a surge in coronavirus cases in early 2021, the purchasing power crisis led to a tidal wave of social unrest. In July of that year, Cuba witnessed the largest anti-government demonstrations in years.

While dissent is banned, thousands of protesters took to the streets of Cuba to express concern over food supplies and the authorities’ handling of the pandemic. The protests were quickly suppressed, but succeeded in upsetting the regime.

“The government got scared, especially when inflation continued into 2022,” Gabrielle noted. To counter these trends, in August 2022, the authorities introduced a second exchange rate for personal transactions at CUP120:$1. This cooled the demand for dollars and eased pressure on import prices.

Cuba climate change
Hurricane Ian knocked out Cuba’s national power grid, severely damaging infrastructure (File: Ramon Espinosa/AP Photo)

At about the same time, Cuba was hit by two simultaneous shocks. On August 6, the island’s main fuel import facility – the supertanker Matanzas – was struck by lightning. Three of his tanks caught fire, knocking out electricity across the country.

A month later, in September, a powerful storm surge swept western Cuba. Hurricane Ian knocked out the national power grid. It also caused thousands of evacuations and caused extensive damage to infrastructure, including tobacco and sugar cane fields.

Gradual opening

Even before last year’s events, the PCC agreed to expand private sector activity in an effort to boost production and ease goods shortages. In February 2021, the government agreed to grant private company status to 2,000 listed professions (up from 127 previously), facilitating partnerships with foreign investors and limiting state control over commercial activities.

While a new law granting equal commercial rights to private and state-owned companies has yet to be agreed, the government hopes fragmented reforms will boost growth.

“Heterodox policies will be maintained, but a gradual opening is likely to be the course for the new parliament,” said Guillaume Long.

Until then, large numbers of Cubans are expected to try to leave the country. A record 220,000 Cubans were caught at the US-Mexico border in fiscal year 2022, which ended Sept. 30, Reuters news agency reported. In December 2022 and January 2023, U.S. Customs and Border Protection reported nearly 50,000 encounters with Cuban migrants.

The experience of Guerra Ferrer, the engineer, is not uncommon: “I have many friends who have emigrated. My son can also leave to help my wife and me once we retire.”

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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